NBFC Education Loan

As a matter of concern over skyrocketing prices of education, the expenses are ballooning twice as fast as the rate of inflation due to which most of the students are unable to fulfill their dream of studying abroad. On account of this, many students prefer to study abroad with the help of an abroad education loan. In order to obtain an education loan for higher studies from Government banks, students are required to pledge collateral, but what about the students who cannot afford to pledge any collateral as security?

Such students can approach private lenders for education loans without collateral. Private sector banks and NBFCs are two major unsecured education loan lenders in India, and this article is focused on NBFCs. You must be thinking “What is NBFC?”, “is it safe to take an education loan from NBFC?”, “What are the top NBFCs in India?”  and many more things. In this article we will try providing almost every bit of information regarding NBFC education loans.

Read this complete article and comment down your queries below.

NBFCs play an important role in the field of financial services, offering a wide range of services similar to traditional banks (public and private banks) but without a banking license. So, what exactly does NBFC stand for? The full form of NBFC is Non-Banking Financial Company. These institutions provide various financial services such as loans (educational, personal, house, vehicle, gold, etc.), advances, the acquisition of shares, stocks, bonds, and debentures, and leasing. 

In India, NBFCs have witnessed remarkable growth. According to recent data from the Reserve Bank of India, NBFCs' total assets grew by 15.5% in 2023, which shows their importance in the financial ecosystem. Their non-stringent rules for providing loans fill gaps left by traditional banking institutions.

Education loans from Non-Banking Financial Corporations (NBFCs) are financial solutions for students aspiring to pursue higher studies abroad. These loans are typically unsecured, and cover various expenses such as tuition fees, living costs, travel expenditures, and other study-related expenditure.

While NBFCs do provide substantial education loans without collateral (up to Rs. 1 crore), it’s essential to note that their interest rates tend to be slightly higher. So, is it safe to take an education loan from NBFCs? As NBFCs are monitored and regulated by the Reserve Bank of India (RBI) it is safe to take an education loan. Still, we suggest you to get in touch with WeMakeScholars, we will help you in finding the safest and best suitable NBFC for your education loan journey. Here is the list of some loan parameters used by these financial institutions:

*The Rate of Interest (RoI), the maximum amount for loan approval, etc. are the most researched aspects of any kind of loan. One needs to note that none of the above terms are constant when it comes to securing abroad education loans from NBFCs.

Maximum loan amount

On average, NBFCs permit a maximum loan amount of up to Rs. 1 crore for education abroad without collateral. The loan limits for education loans abroad differ from country to country. For the US, it is 1 crore, whereas for countries other than the US (Germany, Australia, Ireland, and Canada), it is ₹40 Lakhs.

Interest rate

As mentioned earlier, the interest rates of these NBFCs are not constant; They vary based on various factors such as country, course, students profile, etc. but usually it ranges between 11% to 15%.

Processing Fees

NBFCs charge around 1%-2% of the total loan amount as a processing fee with additional GST charges as the NBFCs charge slightly higher as compared to most government banks.

Moratorium Period and Repayment

In NBFCs,the moratorium period consists of the course duration plus 6 months. The loan applicants are required to start their first payment of the interest amount from the month following their education loan disbursement. 

The loan applicants can opt to pay the interest in full or partially. After the moratorium period, the principal amount can be paid in the form of EMIs.

Maximum Loan Tenure

The maximum loan tenure offered by NBFCs for an abroad education loan without collateral is around 10-15 years

Loan Insurance

It is a one-time payment fee, which is about 1% to 2% of the total loan amount sanctioned. The applicant must take loan insurance. The loan insurance fee is adjusted in the loan amount.

Are you still confused about which is the best NBFC? If yes, then go through this section it will help you choose the best one as per your requirements. 

Primarily, there are four top NBFCs functioning in India which mainly focus on lending education loans, these are Avanse, Auxilo, Incred, HDFC Credila. We have written a separate article compiling all the details required for an education loan from these institutions. You can just click on the bank in the highlighted text and read all the information you require. Here we will give you an overview of the loan parameters of all these financial institutions:

Read More on Abroad Education Loan Without Collateral NBFCs, Processing time & More!

Watch the 9th episode of our web series, LoanFlix, on YouTube. It provides valuable insights into what you need to know before processing your unsecured or non-collateralized education loan, offering information that is not easily available elsewhere.

If you are not qualified for loans from Private or Public banks, then there is a possibility that you can get it from NBFCs. You must be wondering “why is it easy to get an education loan from NBFC then from  private or public banks?” The reason is banks lend the money that is deposited by their customers and currently have a lot of non-performing assets, so they have to be stringent in providing loans and need to have stricter terms and conditions or eligibility criteria

Whereas, Investors fund NBFCs and so they do not need to have stringent or strict eligibility criteria when providing education loans. It is relatively easier for students to get loans from NBFCs than from banks. 

• Applicants must be Indian citizens or have Indian residency status 
• The student must be between the age of 18 and 35 years. 
• The student must have secured admission into any master or PG level courses at reputed universities recognized and accredited by relevant governing bodies.
• Eligible candidates should have a strong academic record, often requiring a minimum GPA or percentage in their previous qualifying exams or decent scores in pre-requisite exams such as IELTS, TOEFL, and GRE.  
• While collateral isn't required, applicants must show financial stability or have a co-applicant with a stable income source to ensure repayment capability.
• Co-applicant such as a parent or guardian with a steady income is required to support the loan application. After deducting liabilities and expenses, the co-applicant’s income should meet the NBFC’s specified threshold (e.g., at least Rs. 4 lakhs per year).
• NBFCs consider the applicant's and co-applicant’s credit history to assess their repayment reliability. A minimum CIBIL score of 700 is often required.

Also Read: Eligibility Criteria For an Education Loan Co-applicant.

There is a long list of documents required for student loans from NBFCs, you can check out this blog “Documents Required for an Education Loan”, there we have provided you the complete list of the mandatory documents required for processing your education loan. In this section, we will provide you the list of some mandatory documents asked by these financial institutions:

1. Loan Application Form: Duly filled and signed loan application form with accurate information. It is provided by particular NBFCs or you can ask from our financial officer by requesting a callback
2. Passport-size Photographs: Recent passport-sized colored photographs of the applicant and co-applicant (if any).
3. Identification Proof: Passport, Aadhar card, Voter ID, or Driver's License.
4. Address Proof: Utility bills (electricity, water, gas), rental agreement, Aadhar card with current address.
5. Income Proof: Bank statements (for the last 6 months), salary slips, income tax returns (ITR) for the last 2-3 years, or Form 16.
6. Educational Documents: Admission letter and fee structure issued by the educational institution, mark sheets/certificates of previous academic qualifications and result of the entrance exam through which admission is being taken (e.g. CAT, GRE, GMAT, TOEFL, IELTS, etc.)
7. Co-Applicant/Guarantor Details: It includes their identification proof, address proof, and income proof.
8. Collateral Documents: For secured loans, documents related to collateral such as property papers (land or house), Fixed Deposit receipts, or any other asset papers.
9. Business Proof: In the case of self-employment, business registration certificate, business license, or any other relevant document.

When you calculate your total loan amount that is required to complete your higher studies, It becomes pretty obvious for the students to have a doubt on what all the expenses they can include in their education loan. 

To make it easy for you, we have written an article on “expenses covered under education”. It will help you make an informed decision on the total loan amount. Here we have listed down some common expenses covered under NBFCs:

• Tuition Fees
• Hostel or Accommodation Fees
• Books and Study Materials
• Exam Fees
• Laptop or Computer Purchase
• Travel Expenses
• Project Work and Internship Costs
• Library Fees
• Laboratory Fees
• Miscellaneous Expenses (such as uniforms, stationery, and other academic necessities.)

NBFCs meet the immediate cash requirements of students by providing fast loan disbursements usually in not more than 7-15 working days depending on the submission of necessary documents. NBFCs are more liberal and flexible and hence, they are willing to go to lengths to address some of the students’ common issues with interest rates and amounts of the loans. When it comes to borrowing, the fact that NBFCs do not require any collateral, offer the full amount without adhering to the margin rate, and accept almost any co-applicant student loan provider has gained popularity. Keep reading to learn more about the benefits.

Instant Loan Approval

In this fast-paced world, we can get vegetables, fruits, and even food in an instant. But can we get a loan in an instant? The answer is yes! Now, with the superfast process of NBFCs, you can also get a loan in an instant. 

All you need is to submit the right documents in time, pay the processing fee of 1 to 1.5%, and you will be good to go with your loan. The NBFCs will get you a loan in about 7 to 15 working days, once the file is logged in with all the required details and documents.

Flexible Approach

NBFCs have a very flexible approach when dealing with students. They understand students’ concerns about the interest rates or the loan amount to be sanctioned and hence can compromise their terms a bit. 

We too at WeMakeScholars understand the concern of the students when they say that the ROI is high. In case the students are unable to negotiate the ROI or the loan amount with the NBFCs, they let us know that and we do the negotiation part on the behalf of students.

No Collateral Required

NBFCs do offer loans against collateral, but most of the loans sanctioned by them are non-collateral loans. Non-collateral loans are one of the most attractive features of NBFCs which is also the reason most students opt for these financial institutions over other lenders. 

There were star students who wanted to study abroad, but could not as they did not have finances and no collateral as well to pledge against the loan. They got education loans from NBFCs as they provided the loan without stressing much on the importance of collateral.

Full Loan Amount

The banks, private or public have a concept called loan margin which asks you to arrange a certain percentage of the whole amount of your expenses by yourself. The loan margin concept does not apply to the NBFCs and you can get the full amount that you need. 

Also, banks will provide only the amount that you are eligible for like it may be according to the value of your collateral or the category of the university, whereas with NBFCs even if your eligibility for a certain amount is not met you can get the full amount by negotiating with them.

Wide Range of Co-applicants

Let us first see the list of financial co-applicants eligible for each lender and then discuss how versatile the list of financial co-applicants for NBFCs is.

You can see in the above table that the range of eligible financial co-applicants for NBFCs is relatively higher than that of public or private banks. For them, along with the other options of co-applicants, even your brother-in-law can be considered a co-applicant.

NBFCs provide the flexibility of choosing a co-applicant from a wide range of candidates. That gives them a chance to take an education loan even if they do not have financially stable parents or siblings or first relatives.

Most experts would suggest you to think twice before approaching NBFCs to fund your higher studies abroad. Financing your education becomes a financial liability when you take a loan. Hence, it becomes extremely important to consider the following cons before you decide to take an education loan from NBFCs. 

*However, it's important to note that these drawbacks are only applicable if you are going to these finacial institutions directly. If you choose to go through WeMakeScholars, the loan process will become smooth and hassle-free because we provide end to end support to our students.*

Moratorium Period Payments

One key feature of education loans is the moratorium period, during which borrowers are not obligated to make payments towards their education expenses. However, unlike public banks, NBFCs often require partial or full interest payments during this period, adding to the financial burden from the outset.

Higher Processing Fees

NBFCs typically charge a processing fee of around 1-1.5 % of the sanctioned loan amount. This fee is calculated based on the total loan sanctioned, potentially resulting in substantial charges for borrowers. For example, if the sanctioned amount is Rs 40 lakhs, the processing fee, plus GST charges, would add up significantly.

Rejection of loan applications without any valid reason

Some applicants have reported instances of NBFCs rejecting loan applications suddenly and without providing valid reasons. While not all NBFCs engage in this practice, it adds uncertainty to the borrowing process.

Interest Rate Increases Without Notice

Another concern is the possibility of interest rate hikes without prior warning. Changes in regulations, like those introduced by the RBI in 2019, have led to financial strains on NBFCs, prompting them to raise interest rates on education loans without informing borrowers beforehand. This unpredictability can significantly impact borrowers' financial planning and repayment capabilities.

Applying for an education loan through WeMakeScholars offers several benefits, including a better interest rate, faster processing time, and assistance in negotiating with the lenders. WeMakeScholars works with various banks and NBFCs to provide end-to-end services for education loans, ensuring that students receive the best possible deal. The advantages of using WeMakeScholars for an education loan include:

Better Interest Rates: WeMakeScholars can help secure lower student loan interest rates, typically 0.5% to 2% lower than the bank's average

Faster Processing Time: The average sanction timeline is 21 working days for government banks and less than 7 working days for private banks and NBFCs, after the submission of all documents

Assistance in Negotiation: WeMakeScholars' team negotiates with the banks and lenders on the applicant's behalf, potentially leading to more favorable terms

Wide Range of Lenders: WeMakeScholars works with 14+ banks, including public, private, and NBFCs, providing students with a variety of options for their education loan

Reduced Rejection Risk: WeMakeScholars can help prevent rejections by working with the lenders to ensure that students meet the eligibility criteria and receive the best possible deal